By Ramsey Scott

Wyoming Tribune Eagle

Via Wyoming News Exchange

CHEYENNE — Wyoming's economic recovery continued in the third quarter of 2018, but a sharp dip in oil prices to end the year could mean less revenue and economic activity for the state going forward. 

The Wyoming Economic Summary Report for the third quarter showed the state's economy being driven into the black by an increase in oil production and the subsequent activity in sectors supporting mineral extraction. 

"It overall looks like Wyoming's economic conditions continued to do what we call rebounding from the downturn of 2015 and 2016," Wenlin Liu, Wyoming's chief economist, said Wednesday. "That recovery continues at a moderate pace. That's why our unemployment rate (3.9 percent) still is relatively low, but not dropping a whole lot, and most industries are growing."

Taxable sales for the quarter grew by 9.3 percent over the same time in 2017, for a total of $5.2 billion. That increase was largely the result of the 21.1 percent growth in the mining sector, which includes increases in equipment sales and other economic activity related to extraction and production.

Wyoming's transportation and warehouse sector also saw a 28.7 percent year-over-year increase. 

The state took in $174.9 million in severance taxes for the quarter, which was almost 15 percent higher than the same quarter in 2017 and the highest amount Wyoming has collected since the last quarter of 2014. But even with that increase, the state is still a far cry from the level of mineral extraction activity it saw before oil prices crashed in 2015, Liu said. 

The third-quarter growth in the mining sector was still more than 30 percent below what the industry was producing at the end of 2014. And while work on the fourth quarter report is still being done, Liu said the state should expect lower revenues due to a sharp drop in oil prices that started in October and have continued into 2019.

"Everything in this report is before the crazy oil price downturn that started in early October," Liu said.

Oil hit a high of more than $80 a barrel in October but now is down to around $53 a barrel, which means less money coming into the state, Liu said. If the price continues to hover there, or if it drops, Wyoming could see oil producers reduce activity in the state. That would also lead to less activity in multiple sectors that support the industry. 

"Wyoming really wants to avoid prices below $50 a barrel," said Nick Colsch, director of the Wyoming Center for Business and Economic Analysis at Laramie County Community College. 

"When (oil prices) stayed that way permanently a few years ago, even getting to under $40, you started seeing production in the number of active wells fall off a cliff," Colsch said. 

"If oil stays down, it could be trouble. But that's the nature of the beast."

A temporary dip in prices would most likely not cut into extraction activities in the state, Liu said. But a prolonged downturn could cause another decrease in activity that could hit the state's economy hard. 

While Wyoming's fortunes are tied almost exclusively to the mineral industry, Cheyenne and Laramie County have some cushion due to the robust economy of the Interstate 25 corridor in Colorado. The presence of so many state agencies in Cheyenne also helps to insulate the city from some of the more severe economic fluctuations experienced by large mineral-producing communities. 

When it came to economic activity in the city and county, Colsch said there was a significant increase in restaurant and retail spending in the third quarter. That was, in part, due to increased consumer confidence.

Cheyenne also saw a significant bump in home prices compared to the previous year. The city saw an average home price of around $255,000, a $25,000 increase over last year. 

The increase in sale prices has, in turn, increased building activity in the rental sector, Colsch said. 

"We'll see a lot more renters in Cheyenne in the next year, and probably fewer homeowners, which may dip into resale value, but maybe not," Colsch said. "All along the Front Range, the prices have been rising for a few years now."

Colsch said the current increase in home prices looks to be one of stable growth. The rise in prices has been driven by economic activity and high demand, unlike a decade before, when lax regulation led to a housing bubble that eventually burst and took the entire country into a major recession.